The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated on September 14, 2020 as a Delaware
corporation and formed for the purpose of effecting a Business Combination with
one or more target businesses. We completed our Public Offering on February 25,
2021.
We presently have no revenue, have had losses since inception from incurring
formation costs and have had no operations other than the active solicitation of
a target business with which to complete a business combination.
Results of Operations
For the period from January 1, 2021 to December 31, 2021, we had a net loss of
($1,999,541), of which $2,353,750 is a non-cash income item related to the
change in fair value of the warrant liability. Our business activities during
the year mainly consisted of identifying and evaluating prospective acquisition
candidates for a Business Combination. We believe that we have sufficient funds
available to complete our efforts to effect a Business Combination with an
operating business by February 25, 2023. However, if our estimates of the costs
of identifying a target business, undertaking in-depth due diligence and
negotiating a Business Combination are less than the actual amount necessary to
do so, we may have insufficient funds available to operate our business prior to
our Business Combination.
As indicated in the accompanying unaudited financial statements, at December 31,
2021, we had $323,050 in cash and deferred offering costs of $19,250,000.
Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure investors that our plans to complete our
Business Combination will be successful.
Liquidity and Capital Resources
On January 4, 2021, the Sponsor purchased 11,500,000 Founder Shares for $25,000,
or approximately $0.002 per share. On February 22, 2021, the Company effected a
pro rata stock dividend of an additional 2,300,000 Founder Shares with respect
to its Class F Common Stock and on April 8, 2021, the Sponsor forfeited 50,000
Founder Shares to us for no consideration, resulting in an aggregate of
13,750,000 outstanding Founder Shares. The number of Founder Shares issued was
determined based on the expectation that such Founder Shares would represent 20%
of the outstanding shares upon completion of the Public Offering. On February
22, 2021, the Sponsor transferred 25,000 Founder Shares to each of the
independent directors at their original purchase price.
On February 25, 2021, the Company consummated its Public Offering of 55,000,000
Units at a price of $10.00 per Unit, including 7,000,000 Units as a result of
the underwriters' partial exercise of their over-allotment option, generating
gross proceeds of $550,000,000. On the IPO Closing Date, we completed the
private sale of an aggregate of 4,333,333 Private Placement Warrants, each
exercisable to purchase one share of Class A Common Stock at $11.50 per share,
to our Sponsor, at a price of $3.00 per Private Placement Warrant, generating
gross proceeds, before expenses, of $13,000,000. After deducting the
underwriting discounts and commissions (excluding the Deferred Discount, which
amount will be payable upon consummation of the Business Combination, if
consummated) and the estimated offering expenses, the total net proceeds from
our Public Offering and the sale of the Private Placement Warrants were
$552,000,000, of which $550,000,000 (or $10.00 per share sold in the Public
Offering) was placed in the Trust Account. The amount of proceeds not deposited
in the Trust Account was $2,000,000 at the closing of our Public Offering.
Interest earned on the funds held in the Trust Account may be released to us to
fund our Regulatory Withdrawals, for a maximum of 24 months and/or additional
amounts necessary to pay our franchise and income taxes.
Prior to the completion of the Public Offering, the Sponsor loaned the Company
an aggregate of $300,000 by the issuance of an unsecured promissory note (the
"Note") issued by the Company in favor of the Sponsor to cover organization
expenses and expenses related to the Public Offering. The Note was non-interest
bearing and payable on the
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earlier of January 31, 2022 or the completion of the Public Offering. The Note
was repaid upon completion of the Public Offering.
On March 19, 2021, the Sponsor made available to the Company a loan of up to
$4,000,000 pursuant to a promissory note issued by the Company to the Sponsor.
The proceeds from the note will be used for ongoing operational expenses and
certain other expenses in connection with the Business Combination. The note is
unsecured, non-interest bearing and matures on the earlier of: (i) February 11,
2023 or (ii) the date on which the Company consummates the Business Combination.
As of December 31, 2021, the amount advanced by Sponsor to the Company was
$1,350,000.
As of December 31, 2021 and December 31, 2020, we had cash held outside of the
Trust Account of $323,050 and $0, respectively, which is available to fund our
working capital requirements. Additionally, interest earned on the funds held in
the Trust Account may be released to us to fund our Regulatory Withdrawals, for
a maximum of 24 months and/or additional amounts necessary to pay our franchise
and income taxes.
In addition, at December 31, 2021 and December 31, 2020, the Company had current
liabilities of $19,087,962 and $6,449 and working capital of ($17,661,205) and
($4,450), respectively, the balances of which are primarily related to warrants
we have recorded as liabilities as described in Notes 2 and 3. Other amounts are
related to accrued expenses owed to professionals, consultants, advisors and
others who are working on seeking a Business Combination as described in Note 1.
Such work is continuing after December 31, 2021 and amounts are continuing to
accrue. Additionally, the warrant liability will not impact the Company's
liquidity until a Business Combination has been consummated, as they do not
require cash settlement until such event has occurred.
We intend to use substantially all of the funds held in the Trust Account,
including interest (which interest shall be net of Regulatory Withdrawals and
taxes payable) to consummate our Business Combination. Moreover, we may need to
obtain additional financing either to complete a Business Combination or because
we become obligated to redeem a significant number of shares of our Class A
Common Stock upon completion of a Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination because we do not have sufficient funds
available to us, we will be forced to cease operations and liquidate the Trust
Account. In addition, following our Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to consummate our Business Combination, the remaining
proceeds held in our Trust Account, if any, will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategy. Following the closing of a Business
Combination, we do not expect there to be remaining proceeds in our Trust
Account.
As of December 31, 2021 and December 31, 2020, respectively, we did not have any
long-term debt obligations, capital lease obligations, operating lease
obligations, purchase obligations or long-term liabilities. In connection with
the Public Offering, we entered into an administrative services agreement to pay
monthly recurring expenses of $20,000 to The Gores Group for office space,
utilities and secretarial support. The administrative services agreement
terminates upon the earlier of the completion of a Business Combination or the
liquidation of the Company.
The underwriters are entitled to underwriting discounts and commissions of 5.5%
($30,250,000), of which 2.0% ($11,000,000) was paid at the IPO Closing Date, and
3.5% ($19,250,000) was deferred. The Deferred Discount will become payable to
the underwriters from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, subject to the terms of the
underwriting agreement. The underwriters are not entitled to any interest
accrued on the Deferred Discount.
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Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") and pursuant to the accounting and disclosure rules and regulations of
the Securities and Exchange Commission ("SEC"), and reflect all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position as of
December 31, 2021 and the results of operations and cash flows for the periods
presented. Operating results for the period ended December 31, 2021 are not
necessarily indicative of results that may be expected for the full year or any
other period.
Offering Costs
The Company complies with the requirements of the Accounting Standards
Codification (the "ASC") 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A
- "Expenses of Offering." Offering costs consist principally of professional and
registration fees incurred through the balance sheet date that are related to
our Public Offering and were charged to stockholders' equity upon the completion
of our Public Offering. Accordingly, offering costs totaling $30,783,975
(including $30,250,000 in underwriters' fees), and were charged to stockholders'
equity.
Net loss per common share
The Company has two classes of shares, which are referred to as Class A Common
Stock and the Founders Shares. Net income/(loss) per common share is computed
utilizing the two-class method. The two-class method is an earnings allocation
formula that determines earnings per share separately for each class of common
stock based on an allocation of undistributed earnings per the rights of each
class. At December 31, 2021, the Company did not have any dilutive securities or
other contracts that could, potentially, be exercised or converted into common
stock and then share in the earnings of the Company under the treasury stock
method. As a result, diluted net income/(loss) per common share is the same as
basic net income/(loss) per common share for the period.
Income Taxes
The Company follows the asset and liability method of accounting for income
taxes under ASC 740, "Income Taxes." Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
For those liabilities or benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. The
Company recognizes accrued interest and penalties related to unrecognized tax
liabilities as income tax expense. No amounts were accrued for the payment of
interest and penalties at December 31, 2021.
The Company may be subject to potential examination by U.S. federal, states or
foreign jurisdiction authorities in the areas of income taxes. These potential
examinations may include questioning the timing and amount of deductions, the
nexus of income amounts in various tax jurisdictions and compliance with U.S.
federal, states or foreign tax laws.
The Company is incorporated in the State of Delaware and is required to pay
franchise taxes to the State of Delaware on an annual basis.
Recently issued accounting pronouncements not yet adopted
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements based on current operations of
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the Company. The impact of any recently issued accounting standards will be
re-evaluated on a regular basis or if a business combination is completed where
the impact could be material.
Going Concern Consideration
If the Company does not complete its Business Combination by February 25, 2023,
the Company will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem 100% of the common stock sold as part of the units in the
Public Offering, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest (which interest
shall be net of franchise and income taxes payable and less up to $100,000 of
such net interest which may be distributed to the Company to pay dissolution
expenses), divided by the number of then outstanding public shares, which
redemption will completely extinguish public stockholders' rights as
stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the Company's remaining
stockholders and the Company's Board of Directors, dissolve and liquidate,
subject in each case to the Company's obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law.
In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust
Account assets) will be less than the initial public offering price per unit in
the Public Offering. In addition, if the Company fails to complete its Business
Combination by February 25, 2023, there will be no redemption rights or
liquidating distributions with respect to the warrants, which will expire
worthless.
In addition, at December 31, 2021 and December 31, 2020, the Company had current
liabilities of $19,087,962 and $6,449 and working capital of ($17,661,205) and
($4,450), respectively, the balances of which are primarily related to warrants
we have recorded as liabilities as described in Notes 2 and 3. Other amounts are
related to accrued expenses owed to professionals, consultants, advisors and
others who are working on seeking a Business Combination as described in Note 1.
Such work is continuing after December 31, 2021 and amounts are continuing to
accrue. Additionally, the warrant liability will not impact the Company's
liquidity until a Business Combination has been consummated, as they do not
require cash settlement until such event has occurred.
Critical Accounting Policies and Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires our management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following as our critical
accounting policies:
Warrant Liability
We account for the warrants issued in connection with our initial public
offering in accordance with the guidance contained in ASC 815-40 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations. The Company utilizes a Monte Carlo simulation methodology to value
the warrants at each reporting period, with changes in fair value recognized in
the statement of operations. The key assumptions in the option pricing model
utilized are assumptions related to expected share-price volatility, expected
term, risk-free interest rate and dividend yield. The expected volatility as of
the IPO Closing Date was derived from observable public warrant pricing on
comparable 'blank-check' companies that went public in 2020 and 2021. The
risk-free interest rate is based on the interpolated U.S. Constant Maturity
Treasury yield. The expected term of the warrants is assumed to be six months
until the closing of a Business Combination, and the contractual five year term
subsequently. The dividend rate is based on the historical rate, which the
Company anticipates to remain at zero.
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